FedEx continues improved profitability through DRIVE


As the DRIVE transformation programme continues to deliver improved operating income in the third financial quarter of the financial year, FedEx CEO Raj Subramaniam said, “FedEx delivered another quarter of improved profitability in wheat remains a difficult demand environment.”

On revenues that fell 2% y-o-y to US$21.7bn, the US logistics giant achieved a 19% growth in operating income to $1.24bn. Though FedEx Freight saw operating income drop 11.9% y-o-y, the FedEx Express and FedEx Ground segments both saw strong profit growth.

On a 2% fall in revenue to $10,101m, FedEx Express reported a 96% y-o-y improvement in operating profit to $233m in the quarter. Not as dramatic in terms of growth, FedEx Ground still achieved a creditable 12% y-o-y growth in operating income to $942m on almost flat revenue growth to $8,703m. 

The growth in profitability was largely down to the DRIVE transformation programme. Subramaniam continued, “We are making meaningful progress on our transformation while strengthening our value proposition and improving the customer experience.”

According to the company, FedEx Express had lower structural costs that resulted from DRIVE initiatives and the benefit of one additional operating day. Meanwhile FedEx Ground again benefitted from lower structural costs from the DRIVE programme. It also had lower line-haul expense and improved dock productivity that offset higher first and last mile costs.

The division that did not achieve any turnaround in operating income or revenue was FedEx Freight. This saw an operating income drop of 12% y-o-y to $340m on revenues that declined by 3% to $2,125m. Hit by the ongoing US freight recession, the division had lower shipments and reduced rates per shipment. This was in a large part due to oversupply in the US LTL markets that hit trucking companies across North America and has even led to bankruptcies.

Even with the slight dark spot faced by FedEx Freight, the CEO is optimistic with the way things went in the quarter. He concluded, “I’ve never been more confident in our path ahead as we build a more flexible, efficient and intelligent network.”  

Author: Richard Shrubb

Source: FedEx